Speech to the Indonesia Australia Business Council

Supporting Indonesia’s Reforms

26 June 2007, Indonesia

Introduction

Dr Mari Pangestu, Minister for Trade, Noke Kiroyan, President, IABC, ladies and gentlemen.

Let me say how very pleased I am to be here for my first visit to Indonesia—and to Jakarta—as Australia’s Trade Minister. I’m honoured to share company with the business people who give real substance to the trade relationship between our two countries.

Today, I want to talk about why trade and economic reform is so important to both our countries. But of course, trade and economics are just one aspect of a relationship that is one of the strongest and most wide-ranging in the Asia-Pacific region.

Australia and Indonesia share a diverse range of interests. And this reflects the strength of our relations today. Australia and Indonesia are close neighbours and friends. I want us to be close partners in our joint growth and development. Australia recognises that Indonesia’s unity, stability and prosperity is as important to us; just as Australia’s well-being benefits Indonesia.

Over the years, our relationship has endured despite well known ups and downs. And it has endured despite tragedies involving our people—from disasters or the acts of terrorists.

I want to take this opportunity to say again on behalf of the Australian Government, to state again categorically, that our relations with Indonesia today are, in our view, better than they have ever been.

Both governments work together on many fronts. We have many common interests.  We hosted a visit by President Yudhoyono in 2005. And we look forward to having him back in Australia in a couple of months at APEC. There are regular bilateral visits involving senior Ministers. And we are cooperating on areas as diverse as counter-terrorism, inter-faith dialogue and illegal fishing.

This week’s meetings, of course, have concentrated heavily on the trade aspect of our relationship. Trade is vital to promoting our shared interests in economic growth and development.

Trade co-operation

So it’s very encouraging to say that our bilateral trade is getting stronger. As Dr Pangestu mentioned a few moments ago, and I would like very much to agree with her, our trade relationship is strong, but it has potential for substantial additional growth.

While our two-way trade with Indonesia has grown by 50 per cent over the last decade, Australia’s trade with the ASEAN group over the same period has grown by over 140 per cent.  So we have done well, but we can do a lot better, and that has been the objective of our discussions over recent days.

We’re concentrating at bringing out the best in our trade relationship through the Trade and Investment Framework.Dr Pangestu and Mark Vaile, my predecessor in this role and now Deputy Prime Minister of Australia, launched the Framework nearly two years ago. It has developed into a very practical tool to deepen our already healthy bilateral trade and investment relationship. Our two-way trade in goods was worth about ten billion dollars in 2006; Indonesia is Australia’s 13^th largest trading partner.

Australian investment in Indonesia by the end of 2005 was worth more than two and a half billion dollars. But the business delegation who are present with me in Indonesia this week are clearly committed to furthering that investment in the years ahead.

Indeed, there are many projects on the table under consideration which could multiply the current level of Australian investment in Indonesia many times over.  We are anxious in creating the sort of business environment so that many of those projects can proceed for the mutual benefit of our two countries.

As the largest economy in ASEAN, the Indonesian market holds real potential as a productive place to invest and do business. Austrade estimates that more than 400 Australian companies have a presence here, including many familiar names like ANZ Bank, the Commonwealth Bank, Leighton Holdings, BHP-Billiton and Rio Tinto.

I know that a few more Australian companies are getting ready to dip their toes into the Indonesian market and to look at what opportunities there might be for investment. I hope that the large business delegation that is part of this week’s activities will help to provide the kind of interchange and the boost to investor confidence that will build on the relationship that has been so important over recent times. 

Both of us are working hard to complement our strong bilateral trade elsewhere in the region, through the ASEAN-Australia and New Zealand FTA that we’re currently negotiating.

In APEC, both of us have had a long history of working together, with highlights such as the Bogor Summit in 1994 right through to the very busy 2007 APEC year, which Australia has the honour of hosting.

I appreciate Indonesia as a constructive member of the APEC family, so I welcome its participation in this year’s agenda.

Taken all together, our trade co-operation and our investment relationship are enjoying happy times. And I am confident that even better times are ahead.

Economic reforms

By most forecasts, the outlook for Indonesia’s economy is positive:

• the IMF, for example, forecasts 6 per cent-plus economic growth for 2007 and 2008
• real exports could grow by 8 per cent this year and by more than 9 per cent next year
• from 1999 to 2006, the average annual growth of housing loans in Indonesia was the fourth-fastest in Asia, a sign of strengthening middle class consumer confidence[1]

There’s a real feeling of excitement about Indonesia’s economy and, like many other major emerging economies, I think that’s because Indonesia has undertaken a new range of structural reforms. There are new efforts to sell government stakes in state-owned-enterprises; in fact this morning I met the new Minister for State-Owned Enterprises, who is busily setting about the task of putting himself out of business by disposing of SOEs so they can be effectively a part of the business sector of the new Indonesian economy.

The reforms in the financial sector, in infrastructure and in the investment climate are critical.  They are particularly important also for those who are seeking to invest in Indonesia from other parts of the world.

And I want to throw my support behind the Indonesian Government’s commitment to improve competitiveness, attract foreign investment and implement these economic reforms. By pursuing these reforms, the Indonesian Government is showing foreign investors and the world that it is serious about locking-in growth and prosperity for the long term. These economic reforms aim to make it easier to do business in this country, which will make life better for Indonesian consumers, and build wealth for the nation.

If I could boil it down to a couple of words, economic reform is about creating opportunity and choice.

And when it comes to investment around the world, those who have dollars to invest can be quite mobile in deciding which particular projects they want to back.  There are a range of developing countries competing for investment and many worthwhile opportunities around the world. 

And this investment capital is most likely to face a home in places where it is welcome, where there is a high degree of security and where there is a regulatory regime that gives confidence to investors that their money is well used and that they will be able to repatriate profits at the appropriate time, where they can be meaningful and useful members of the community in which they work, and where they can contribute to the growth and development of the host country.

It is this kind of environment that I am confident Indonesia is seeking to create at the present time. 

Our business delegation has raised, from time to time, issues of concern.  And I thank you Dr Pangestu and other Ministers for your willingness to take on board those issues of concern and look at ways in which we can resolve those issues. 

It is important for Indonesia, because some of these matters are critical to actually clinching the deal that will be so important to the future growth and development of this region.  It’s also important to investors because they want to take advantage of the opportunities that exist in this country for mutual growth.

I would like to talk briefly about the situation in Australia, because we have also enjoyed the benefits of significant economic growth.  Reform to us is ongoing and has been substantial over recent years.  We are now enjoying 16 years of continuous growth, a record never matched in our previous history.

Our reforms certainly haven’t been painless, they never are. Some jobs have been lost. But others have been gained. As we have lowered tariffs, that has not destroyed jobs.  In fact, unemployment is at the lowest rate for a couple of generations.  Our economy has grown stronger, more open and more exposed to international competition.

With prudent management, Australia’s economic fundamentals are today in great shape. Our exports are growing; inflation remains low; business and consumer confidence is exceptionally high; and unemployment is at a level that we simply thought was not achievable four or five years ago. And with rising real wages, our consumers have more choice; to spend, to save, or to invest in new businesses and new opportunities.

Investment law

If Australia is any guide, it shows why economic reforms are vital and they are worthwhile.  The pains that are endured are short term, and then the rewards are rich and enduring. If reforms are carried out fully and with courage, I am confident that they will create wealth. Or, put another way, reforms will create more choice across many sectors of the economy.

Indonesia’s new Investment Law, Mining Law, Transport Law, are all important elements in building the sort of confidence in the business community that will be necessary to promote investment in the years ahead.

Our Australian Embassy and Austrade officials are happy to work cooperatively with Australian business and their contacts in Indonesia to help facilitate new opportunities.  We want to work to improve business mobility and people-to-people links. 

Australian visa officers are striving to provide faster and more reliable services to Indonesians who need to travel to Australia on business.  Processing business visas now takes only about three working days. The Embassy is working with the IABC board to issue multiple-entry visas for people travelling to Australia for business purposes.

Your role

I’d like to finish by saying a few things about the important role of business.

Business is very much at the heart of world trade; whether the business is a woman running a family shop or a multinational company setting up operations. The views and the role of businesspeople in helping to guide and direct the development of policy is absolutely critical.  You feel the pulse of the economy.  It’s essential that there be ready and available advice between the business community and government to ensure that our direction is well focused.

For that reason we appreciate particularly the work of groups like the Indonesia-Australia Business Council and your counterparts in Australia.  I am anxious to keep the door open so that we can work constructively together to achieve the things that are particularly important for us all.

I particularly thank the work of the Experts Group that reported to us yesterday and recommended that we proceed to the next stage in developing a free trade agreement between Australia and Indonesia – namely the development of a feasibility study so we can assess the merits and the objectives and the scope of what can be achieved through an agreement of this type.

Both Dr Pangestu and I have both undertaken to recommend to our governments that we should proceed with this next step.  Ultimately it’s a whole-of-government decision, but we see real benefits in strengthening and creating an enduring trading relationship by underpinning business activities with a model and progressive free trade agreement. 

So, our thanks to the Experts Group, our thanks to the business community that is helping us to build the trading relationship which is so critically important in our overall interchange with one another. 

I’d also like to welcome the Policy Dialogue underway as part of the Trade and Investment Framework. It’s certainly a practical way of bringing the main players from both countries together and to help ensure that we better understand one another’s needs, one another’s culture and one another’s ways of doing business, and the opportunities, and then the ways in which we can take advantage of them. 

With the spirit of co-operation, I’m confident that we can develop an open and competitive market place and that’s undoubtedly going to benefit us all.

Conclusion

I think the opportunities and the outlook for the Indonesian economy are positive.  I believe the Australian economy will continue to grow and expand. So by building and working together we can achieve enormous benefits for both Australia and Indonesia. 

We have a solid record of cooperation.  Let’s build on that in the future.

Ends

[1] Source: IMF Regional Economic Outlook, Figure 3.1.0, Housing Loans in Asia.